JSPL beats Q1 expectations despite odds

On July 9, JSPL’s net profit fell 23% 1,929 crore, beating consensus analysts’ estimates 991 crores, as indicated by Bloomberg.

The company’s sales volumes, both in domestic and export markets, were affected by challenging market conditions and imposition of tax to discourage steel exports in May. JSPL’s sales fell 16% sequentially to 1.74 million tonnes (mt) during the June quarter, but rose 8% from a year ago due to a lower base. Exports contributed 26% to sales in the June quarter.

However, better price realizations in the domestic market helped. Steel prices in the country rose significantly in March following the Russia-Ukraine crisis and remained high until May 22, after which they began to decline due to the imposition of export taxes. As a result, price realization increased 7,300 per tonne sequentially, according to analysts, for which they attributed high-value exports already booked for products like wire rods and beams.

The company’s management said receipts increased about 12% sequentially, although costs also increased by 10%.

Adjusted operating profit up 3% 2,993 crore from the last three months but a decline of 32% as compared to a year ago. The company has attributed this to increase in input cost. It also benefited from low-cost iron ore deposits at Sarada Mines. However, the rising cost of coal continued to cause losses.

The company has won coal blocks in the auction but it will take time to get supplies from these blocks. The impact of higher input costs will continue in the second quarter as well, though the benefits of the fall in coal and iron ore prices will start accruing from the December quarter.

However, concerns remain over steel prices, which have fallen by around 15% since the implementation of the export duty order. The impact of rains on construction during monsoon will also keep pressure on steel prices.

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